台灣國際航電 (GRMN) 2007 Q3 法說會逐字稿

At this time, I would like to welcome everyone to the Garmin Q3 2007 earnings call.

All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there there will be a question-and-answer session.

(OPERATOR INSTRUCTIONS) I will now turn the call over to Ms.

Polly Schwerdt.

You may begin your conference, ma'am.

Good morning.

We would like to welcome you to Garmin Ltd.

third quarter 2007 earnings call.

Please note that a copy of the press release concerning this earnings call is available at Garmin's Investor Relations site on the Internet at www.garmin.com/stock.

Additionally, this call is being broadcast live on the Internet.

Please note that this webcast does include slides which you can view during this call.

An archive of the webcast will be available until November 30, 2007.

A telephone recording will be available for two business days after this call, and a transcript of the call will be available on the website within 48 hours at www.garmin.com/stock under the events calendar tab.

This earnings call includes projections and other forward-looking statements regarding Garmin Ltd.

and its business.

Any statements regarding our future financial position, revenues, earnings, market shares, product introduction, future demand for our products, and our plans and objectives are forward-looking statements.

The forward-looking events and circumstance discussed in this earnings call may not occur and actual results could differ materially as a result of risk factors affecting Garmin.

Information concerning these risk factors is contained in our Form 10-K for the fiscal year ended December 30, 2006 filed with the Securities and Exchange Commission.

Attending on behalf of Garmin Ltd.

this morning are Dr.

Min Kao, Chairman and Chief Executive Officer; Cliff Pemble, President and Chief Operating Officer; Kevin Rauckman, Chief Financial Officer and Treasurer; and Andrew Etkind, General Counsel.

The presenters for this morning's call are Dr.

Min Kao, Cliff Pemble, and Kevin Rauckman.

At this time I would like to turn the call over to Dr.

Kao.

Thank you, Polly.

Good morning, everyone.

From this morning's press release you can see that we recorded yet another record quarter.

Total revenue and EPS again both exceeded our expectations.

Revenue for the quarter increased 79% to $729 million.

EPS was up 57% or 78% excluding the effect of foreign currency.

Unit volume was more than doubled, up 119%.

Revenue growth continued to show strength in all four business segments.

Over 2.6 million Garmin products was shipped during the quarter.

Raising our total to over 25 million units shipped to date.

Continued evidence of the strength of the Garmin brand.

And we now expect to ship over 10 million units in 2007.

Our worldwide employees increased to over 7900.

We added 1100 manufacturing associates during the quarter to meet the increased demand.

According to independent market research Garmin has maintained a strong number one PND position.

We sent approximately 50% of market share in North America.

And a strong and improving market share in Europe.

To keep pace with the continuously increase of demand, for our products, we continue to expand our facilities.

In Taiwan, we have completed our initial bill-out of our third manufacturing facility.

Manufacturing facilities are configured has the ability to produce 26 million units annually.

And we continue to spend R&D and other office space and we will continue to build out of our third facility as demand warrants.

In Europe, we expect the acquisitions of our Italian, Spanish, and Danish distributors will provide us with additional distribution support in those countries.

And in the U.S., work continues on the expansion of our warehouse distribution facility at our Kansas headquarters.

We anticipate completion of this expansion in the first quarter of 2008.

In this morning's press release we announced the appointment of Cliff Pemble to a newly created Chief Operation (inaudible - highly accented language).

Since our inception in 1989 we have been blessed by significant and consistent growth every year.

We have established our Company as a leader of navigation devices with nearly 8,000 employees and subsidiaries and operations at an increasing number of locations.

We serve full market from which we have leveraged great synergies in technologies and operations.

Our average business segment has its own unique characteristics (inaudible) that requires strong leadership.

Especially that Automotive/Mobile segment which has a very significant growth opportunity is extremely dynamic.

So to support our continuous growth and to ensure our future success, we need additional dedicated leaderships.

Accordingly, we have appointed Cliff to a newly created COO position.

Cliff was one of Garmin's first employees in 1989 and is presently Vice President of Engineering and a Board member.

Cliff has been a significant part of many business and product initiatives since the inception of Garmin.

In his new role, Cliff will also assume direct distribution of all Garmin North American subsidiaries.

And I will continue to serve as CEO and Chairman, assigning the additional responsibilities to Cliff will allow me to devote more of my time to business development, strategic planning, and the development of our APAC business initiatives.

Kevin will provide comments on our Q3 results, and I would just like to give a few words on our business outlook.

As we look forward, we are optimistic about the 2007 (inaudible) season.

We feel that our drive for continuous innovation and our vertical integration strategy have positioned Garmin to take advantage of PND market opportunities in both Q4 and into 2008.

We believe we are well equipped to respond to increased demand for products.

We have increased our manufacturing facilities and have grown our inventories in preparation for holiday seasons.

We anticipate that the enhanced product positioning, targeted advertising and the holiday season promotion activities will drive strong growth through the remainder of 2007.

While obviously we are pleased with the margin levels we have achieved so far in 2007, we anticipate pricing and margin compression will intensify during this holiday season.

For our aviation segment, (inaudible) and the GMS 200 will continue to drive retrofit revenue growth.

(Inaudible) existing and recently announced microjet and other certifications also continues for deliveries in 2008 and beyond.

Similarly, we expect a new suite of (inaudible) products and cartography as well as acquired TO1 autopilot to continue to drive our (inaudible) segment group in both out of market and OEM.

For our Outdoor/Fitness segment, the Astro stock trading product and new Rino eTrex products feature high sensitivity GPS has been very well received, and will likely succeed with sales during the holidays.

Additionally, the new Forerunner 50 provides a new and attractive value priced fitness product for holiday gift giving.

So in summary we are pleased with our result and are excited about future opportunities.

Just a few comments about our recent acquisition activities.

We continue to (inaudible) potential acquisition opportunities to broaden Garmin's product offerings and enhance our technology opportunities.

We feel that we have achieved positive results and increased market share from the recent acquisitions of French and German distributors.

Furthermore, in addition to the previous announced acquisition of our Spanish distributors, in early August we announced our intent to acquire our Italian distributor, Synergy.

Additionally, on October 11, we announced our intent to acquire our Danish distributors, Fairpoint Navigation.

This acquisition of distributors in major markets is a part of our strategy to improve brand visibility and market share in Europe.

And early this morning we announced our intent to acquire Tele Atlas this acquisition is consistent with our vision as the market leader in vocation and navigation based product and technology.

This acquisition also demonstrated Garmin's commitment to provide it value for its shareholders.

Historically Garmin believe that an independent, competitive map to operate serve our industry well.

However, in absence of this independent and competitive map to operate, Garmin must exercise its obligation to provide market leadership.

Garmin believes it is best equipped to provide this leadership by acquiring Tele Atlas we also believe that this acquisition is in the best interest of Tele Atlas and Garmin's stake holders.

Leveraging Garmin's strong financial position and long history of innovation with Tele Atlas Maps.

We believe Garmin's vision for the future, which includes the combined Garmin Tele Atlas entity will benefit market participants and customers and Tele Atlas customers.

Kevin will discuss acquisition details more fully near the end of this conference call.

And we will take questions you may have during the Q&A session of this call.

At this tame I would like to turn the call over to Cliff Pemble to provide our products and advertising update.

Thank you, Min.

I will be presenting a brief update on our Q3 product release and other major initiatives undergoing in the quarter.

Turning first in the automotive segment during third quarter we released the nuvi 260 which features text to speech capability.

Nuvi 260 rounds out our value conscious nuvi 200 product line by offering a configuration for nearly every customer and budget.

The nuvi 200 line is becoming one of our more popular product lines within the lineup that we have.

In addition, we released the nuvi 700 series which is a totally new family of products rounding out the upper end of our product lineup.

The nuvi 700 series includes all of the features of our high-end PND products but it is wrapped in a new form factor which is thinner and includes a built-in antenna, eliminating the flip-up antenna design of the previous generation product.

We've also added some new features like a where am I location search and a where's my car search that allows the customer to easily find their parked vehicle.

With the release of these new PNDs, our Q4 product line is complete and we believe we have excellent shelf space and sufficient product to meet the demands of the holiday season.

Turning next to the outdoor and fitness segment we released updated versions of our eTrex product family.

The goal of these new products was to incorporate a state of the art, high sensitivity GPS receiver for better operation in areas of dense foliage and other shading conditions.

As you would expect, we offer several configurations in order to best match a product with customer needs starting with the basic eTrex H through the higher end eTrex Vista, HCX which feature a memory expansion slot.

Also during Q3 we released our new Astro dog tracking system.

In addition to tracking up to 10 dogs a moving map this unique product also includes advanced feature such as on point detection and ability to record the location and number of birds encountered or taken in a hunt.

The Astro has been enthusiastically embraced by the outdoor market and we look forward to expanding our role in this exciting new application for GPS.

Finally, we initiated shipments of our new Forerunner 50 speed and distance watch.

This product features accurate measurement of speed, distance, and heart rate in an economical package and is the first fitness product to offer wireless connectivity so that the user can automatically download workout information to our Garmin connect fitness site when in proximity of a home computer.

Turning next to aviation, several exciting announcements were made at the recent NBAA trade show.

First, Cessna announced that the G1000 will be offered on 2008 model Caravan aircraft.

The response from Cessna's customers was positive and according to public information provided by Cessna an additional 59 orders were taken for the Caravan during the NBAA and AOPA shows.

As we mentioned last time, Cessna has selected Garmin as the avionics supplier for the new Skycatcher light sport aircraft.

Cessna recently announced that orders for this new aircraft exceed 850 units which is further validation of this exciting aircraft category.

Also during the NBAA show, Cicada announced that the G1000 will soon be available on the TBM850 and Piper announced that it selected the G1000 for its new single-engine VLJ.

Finally, we announced the G1000 retrofit program for the King Air 200 and B200 aircraft.

The King Air 200 announcement complements our existing program for the C-90.

As an update on this program we've completed the certification flight test and anticipate shipping the system to installers during the fourth quarter.

We continue to maintain delivery support of Cessna, Mustang VLJ and are supporting the development of several other VLJ programs.

The Embraer Phenom program is progressing well as is the Diamond D-jet and Honda jet.

In fact, some of you may have noticed Honda's corporate image advertisement which aired this weekend and features images of the Honda jet.

Finally, we've launched our fourth quarter advertising campaign this year we'll be -- we will be very active in promoting our product on television, radio, print, and at the point of sale.

Some of you may have noticed our TV campaign which started this past week.

We're looking forward to making a favorable impression on customers leading up to the holiday shopping season and the stores are ready to receive them with many appealing offers that will be available on Black Friday.

That concludes my update.

Kevin will continue his financial update and will provide detailed comments on our proposed offer to acquire Tele Atlas.

Thanks, Cliff.

I'll be presenting third quarter and year to date financial results as is normal, including business segment details and then finally conclude with our updated full year 2007 outlook.

So first on the Q3 income statement our revenue during the period that we recognized the $729 million net income of $194 million and earnings per share of $0.88 per share.

That represents 79% top-line growth and 57% earnings per share growth, and when we strip out the foreign currency, that actually represents 78% earnings per share without FX.

For the unfavorable $0.01 EPS impact was due to FX loss of $3.6 million during the period.

As we've announced throughout the year the gross margin of 46.9% was better than expected due to strong PND volume in the U.S.

and in Europe.

PND price erosion offset by some material cost reductions, and operating efficiencies in our factories.

We announced 29.4% operating margin which is down from 29.7% last year but much better than expected.

Our gross margins were 190 basis points unfavorable, advertising 40 basis points favorable from Q3 '06.

Our other SG&A was 70 basis points unfavorable, and our R&D, 190 basis points favorable.

We did ship 2.7 million units during the quarter on the strength of our Auto/Mobile segment.

And our average selling price during Q3 was $271 per unit, 7% below the second quarter of '07.

The non-GAAP measures that we reported include net income excluding the effect of foreign currency and during Q3 this impact was $0.01 per share favorable.

Looking at revenue by segment we experienced a triple digit revenue growth across the Auto/Mobile segment while the unit growth in that segment grew 203%.

Revenue within the aviation segment continued its strong growth with a 27% growth rate over the third quarter of 2006.

Our marine segment extended its Q2 growth into Q3 with a 17% revenue increase during the quarter.

And our outdoor segment also continued its recovery as the growth within that segment was 20%.

Overall our revenues grew 79% during the third quarter which was in line with our earlier expectations.

Sales of products introduced within the last 12 months contributed to 41% of our Q3 revenue.

Overall our total revenues have grown 69% during the year to date 2007 period.

And on a year-to-date basis all four business segments have experienced double-digit revenue growth with Auto/Mobile revenues up over 100% and our aviation segment up 30% over year to date 2006.

During the third quarter, North American revenue was up 71%, while our European business increased 89% during the quarter.

Our Asian sales also grew 109% during the period.

Our Q3 North American unit sales increased 121% on the strength of PND product sales, our Europe unit sales kept pace during the quarter and also grew 126%.

Year to date, North American revenue is up 76% while our European business has increased 58%.

Our Asian sales also grew 60% on a year-to-date basis.

North American unit sales year to date increased 114% on the strength of PND product sales and our Europe unit sales also grew over 85%.

Because of the explosive PND market, our Automotive/Mobile segment now represents 72% of our total business.

In the Auto/Mobile segment the North American market unit growth was greater than European growth.

However, both continents experienced 100% unit growth quarter over quarter.

As mentioned earlier, Garmin's total North American market growth was similar to the growth in Europe during the quarter and North America represents now 62% of our total business.

Looking at product mix, when we evaluated the PND units in our Auto/Mobile segment in Q3 we had nearly two-thirds of our revenue coming from what we classify as the lower price products and nearly one-third from the mid-range and the high end products.

Moving next to margin by segment, Q3 aviation gross margin and operating margin remained relatively stable at 66% and 36% respectively.

Q3 Outdoor/Fitness gross margin and operating margin decreased to 52 and 33% respectively.

In our third quarter marine growth margin decreased to 53% while the operating margin in the segment decreased to 33% due to lower volume during the quarter.

Third quarter Auto/Mobile gross margin came in at 43% beating our expectation.

The primary reason for the strength of the gross margin in the segment is that price compression was not as severe as earlier expected.

We also experienced benefit from favorable product mix as PND units sold in the U.S.

were greater than in Europe.

Operating margin of 28% within this mobile Auto/Mobile segment was higher than expected.

Due to expected price competition of PND products during the holiday season we continue to expect this Auto/Mobile segment will experience declining growth in operating margin during the fourth quarter 2007.

Moving next to our operating expenses, R&D increased $4 million quarter over quarter in dollar terms but was down 190 basis points to 5.6% of sales.

We now employ nearly 1300 engineers and engineering associates worldwide.

Our ad spending increased by $15 million over the year-ago quarter, but on a percentage of sales, advertising was down 40 basis points at 5.3% of sales.

We expect ad spending to increase sequentially by nearly 25 million during the fourth quarter as we're just on the front end of our fourth quarter TV ad campaign.

Other SG&A increased 70 basis points to 6.6% of sales from 5.9% a year ago.

We continue to expect that our operating expenses will represent approximately 17 to 18% of sales for the full year but only 16 to 17% for fourth quarter as sales peaked during the holidays.

Moving next to the balance sheet, after distributing nearly 165 million in cash dividends to our shareholders we ended the quarter with a cash and marketable security balance of just over $1 billion.

Our accounts receivable remained relatively flat at $521 million due to linear shipments during the quarter and accounted for approximately 62 days of sales.

We've already collected on over $250 million of receivables during the fourth quarter.

Our inventory dollars were up nearly $200 million from the second quarter and our days of inventory metric increased.

At the end of Q3 we now hold 99 days of inventory which is up from [57] days in the second quarter.

And those dollars are made up of the following categories.

$152 million in raw materials, which represents 29 days.

[$67] million in WIP which represents 13 days.

And $300 million in finished goods, which represents 57 days.

And we ended the period with $18 million in inventory reserves.

The increase in our raw materials and finished goods was planned as we prepare for a significantly higher sales rate during the holiday season, and consistent with past history, we would expect that our inventories to decrease in dollar terms as we exit 2007.

As we've stated in the past, and we've continued to experience, our retail channel inventory continues to be lean as sell-through of most of our products remained strong during the third quarter.

Looking at our cash flow statement, cash flow from operations was $134 million during the third quarter.

We did spend $17 million of CapEx during Q3 and the free cash flow that we announced during Q3 was $117 million.

Cash flow from investing was a $48 million source of cash during Q3, made up of the $17 million CapEx spend, $15 million on acquisitions of business and intangibles, and a net redemption of marketable securities of $81 million.

Cash flow from financing was $146 million use of cash during the period which is made up of $163 million dividend paid, cash dividend paid, and $17 million proceeds from options exercised.

Overall we earned an average of 4.7% on all cash and marketable securities during the third quarter.

Finally, on the financial section of the presentation, we remain optimistic about the future success of our business and therefore are increasing our earlier annual outlook for 2007.

We now expect total revenue for the year to exceed $2.9 billion in sales, a 63% growth.

Our earlier guidance was $2.8 billion.

We now expect earnings per share to grow at least 45% up to $3.40 per share.

Our earlier guidance of $3.15.

Operating margin should come in at 28% for the year.

This represents a 100-basis-point improvement from our earlier guidance as we expect higher volumes during Q4.

CapEx for the full year remains constant at $150 million.

Our effective tax rate remains unchanged at approximately 13%.

And looking at the segment growth rate, our auto and mobile segment is now expected to grow at least [9%] during the year 2007.

All other business segment sales expectations remain unchanged from earlier guidance.

Finally, I'd like to conclude the presentation today by walking you through some of the highlights of the announced acquisition of Tele Atlas this morning.

As you saw from the press release this morning Garmin announced its intention to make a cash offer to acquire 100% of the outstanding shares of Tele Atlas for [24.50] per share euro.

The total equity value of this transaction is approximately 2.3 billion euros, or $3.3 billion U.S.

We believe this offer provides increased value to Tele Atlas shareholders as it represents a 15% premium to the current TomTom offer of 21.25 euro per share.

We have been advised on this transaction by Credit Suisse and Wachovia Bank and have secured financing commitments in place in addition to our over $1 billion of our own cash on hand.

Looking at Garmin's division for the the digital maps of the future, this is one of the primary reasons for our announcement this morning.

Garmin's vision for the digital map of the future includes expanded coverage and improved map quality and we believe that the combination of our two companies will best enable us to be successful in this area.

We also believe that the expansion of map utility will be realized through improved points of interest, local search, pedestrian friendly content, and future of 3D mapping.

Garmin has attracted a large installed base of users, over 25 million, and we intend to capitalize on this growing community and create real-time content using Tele Atlas maps combined with Garmin's connected devices as part of a larger mobile device network.

Some of the business -- some of the benefits of this offer are both seen from the end user and from the Tele Atlas customer perspective.

These benefits include more realistic representation of surroundings, improved mobile search capabilities, including POIs and Internet-enabled local search, intuitive operation within every segment of the navigation market including in-dash, portable, mobile phones, and the enterprise.

Other benefits include real-time content including traffic, and historical flow data, an increase in the number of future applications, including new market opportunities, continued connected device innovation, and finally, a very important benefit, uniform and fair access of Tele Atlas content to all customers.

Finally, we believe that Garmin is the ideal combination with Tele Atlas because of our entrepreneurial culture developed while growing into a global leader in navigation technology.

Garmin has the financial strength, organizational structure to build upon our position as a diversified navigation and communication company.

As mentioned earlier, we're excited about our vision for maps of the future and our ability to execute on that vision.

We have acquired many companies within the last few years and have the ability to provide Tele Atlas with the resources and support necessary to build on their past success.

Garmin's vertical integration strategy and operational skills are a proven business model to effectively manage a global organization.

Finally, it's our intent to retain all management and personnel at Tele Atlas in order to support the expansion of their content offering.

That concludes our formal presentation at this time.

As is customary, we'd like to open up the phone lines to those of you who are in the queue for Q&A so we'd welcome any questions at this time.

(OPERATOR INSTRUCTIONS) Your first question comes from line of Ron Epstein with Merrill Lynch.

Good morning, guys.

Just a question on the potential acquisition.

Kevin, are you expecting a counter bid?

We're expecting a counter bid.

I think we feel like the offer we made this morning at 24.50 euros per share is a strong offer.

It's an offer we feel that Tele Atlas will strongly consider.

We really can't speculate on what may happen in the future.

But again, given the 15% policemen over the existing offer that was out there we feel like it's a compelling offer.

Okay.

And then I guess for Cliff, kind of a question I always come back to is when we think the development of the avionics business, what time frame could we expect something in a larger business jet, something like a CJ1 plus or CJ 2 plus class airplane?

I think that kind of business takes awhile to develop although we're making gradual steps in order to be able to do.

So our work on the Phenom program involves creating some of the elements that are required for the larger business jets.

We think it will take quite a few years really to fully develop the capability.

Great.

Thank you.

Thank you.

Your next question comes from the line of Jeff Evanson with Dougherty & Company.

Good morning, everybody.

Thanks for taking my questions.

Min, could you talk a little bit about how you might attack the Asian market a little more broadly?

It's clearly a big opportunity and growing very quickly for you.

Yes.

As you said, the Asian market is one of the major emerging markets, and we expect that over the next three to five years countries like China, India, and so forth would have significant growth opportunities.

We have recently reorganized and also expected our market (inaudible) of our (inaudible) in our Taiwan base, and also we are expanding our R&D resources in Taiwan to step up our localization effort for the Asia market.

So in summary, we're working hard on both marketing sales and R&D to get ready to participate in these emerging market.

How important is it for you to own your own mapping and turn by turn database in attacking the Asian markets and how do you feel Tele Atlas' positioning compares with others in the market?

I think the mapping -- as far as the mapping data is concerned, the suppliers of the mapping data is pretty fragmented in the Asia market with local suppliers in most other countries.

But at this time there's no clear kind of -- it is unlike North America and Europe.

In those two major market we pretty much have to do (inaudible) position, but in Asia we don't see that.

So at this time it still remains to be seen, how that, how that the mapping suppliers will evolve.

Thank you.

I'm curious if, as you thought about how you would pay for this acquisition, and potentially if the price went higher, when and under what circumstances would you start to think about your offering possibly including equity?

Yes, I think, Jeff, you probably are not going to be surprised that we're not going to comment about other potential financing opportunities.

I think there's a key point here is that we feel like we have the financial strength and flexibility to require Tele Atlas and that is what we're announcing this morning.

My last question, is I was a bit intrigued to see that you expect minimal cost for winding down your relationship with Navteq.

Could you communicate -- talk a little bit about the timing and process and costs related to that?

From a technical and operational point of view, we've been very adept over the years in using maps from various suppliers, so it's not a difficult thing to be able to switch.

The timing I think is yet to be determined, although we would anticipate over the next 12 to 24 months that we would start to transition some products in some markets, depending on the situation.

But I thought you possibly had some legal costs related to your contracts there that might be an issue.

I don't think we can really comment on the details of that particular relationship other than depending on our success with the intent to offer we'll approach it as we go through the process.

Okay.

Thank you very much.

Thank you.

Your next question comes from Noelle Swatland with Lehman Brothers.

Congratulations on a good quarter.

Two questions.

My first question relates to the announcement of the TA deal.

I'm just wondering, do you feel, you know, TomTom seems to illustrate or suggest that their strategy is key now to having an integrated mapping unit under one umbrella.

How do you feel about that yourselves, and are there other options?

Are you pretty committed to making sure that you now have an integrated option also?

And then I'll follow up with the PND question after that.

Noelle, I think as we mentioned before, 90 days ago the industry was quite different than it is today with two independent suppliers.

So given that there's going to be change taking place we feel like it's the right time for us to exercise leadership and that both is in terms of obviously vertically integrating but also being able to define the maps of the future and lead the way in terms of device innovation which we think will be good for the entire industry.

Okay.

Great.

And are you guys making any comments at all in terms of anticipated dilution?

Other than this deal, if it goes through, would be dilutive for the first couple of years and we would be accretive by year three.

Then just Kevin, a question on PND margins this quarter.

I think following some of the strengths that TomTom had seen in their third quarter, can you just talk through some of the differences in terms of the numbers that you saw this quarter and how it compared to last quarter?

I know you had mentioned a greater mix of low end products as well but from my understanding you had a new pricing strategy in Europe and obviously U.S.

is very strong and that's a much higher business for you as well.

Are you asking me to compare Q2 to Q3?

Yes.

Q2 to Q3 we definitely saw overall ASPs come down.

We saw prices come down but not as much as maybe earlier suspected.

I think the product mix as I mentioned, selling more at the low end was the key driver in bringing the PND margins down to the -- from the 46 down to the 43% level.

Okay.

Great.

Thanks, guys.

Thank you.

Your next question comes from the line of Jonathan Goldberg with Deutsche Bank.

Thanks for taking my call.

Just real quickly, going back to the Tele Atlas question, on the increasing dilution are you assuming -- or how much synergies do you have built into that?

What kind of synergies can we expect?

We're not really quantifying, but anticipate overall we're not -- because of our comments on retaining the management personnel we're not assuming a major synergy.

Most of the dilutive impact is related to the amortization of debt and intangible amortization the first couple of years.

Then on that note, are you comfortable with some of the cultural issues that would rise up in the integration process?

It seems like Tele Atlas is pretty close to compound historically.

Are you confident you can keep the key personnel at a combined company?

I think we've also worked with Tele Atlas over the years, in fact we worked with them initially in some of our early PND products and we think the team is very much culturally aligned with us as an entrepreneurial organization, very agressive and our goal in this is to be able to engage as a customer with Tele Atlas and retain all of the customers Tele Atlas going forward.

Then a question on products.

It seems like you guided to about 30% sequential growth, and maybe even a little bit less than that for the auto segment, and historically you see higher levels than that.

Is there something going on?

Is there maybe some reason for your being conservative or is there the potential for upside?

No reason other than our normal conservative nature, but I think sequential growth on the Auto/Mobile segment actually represents closer to 40% collective growth from Q3 to Q4.

Great.

Thank you.

Your next question comes from the line of Yair Reiner with CIBC World Markets.

Good morning, guys, and congrats also for the great results.

First, again, on Tele Atlas.

It looks like you guys were deliberating this move for quite some time.

To what extent can you share with us some of the thinking that you had about moving ahead and why you maybe looked past other options, such as maybe building rather than buying them out?

I think the first comment I'll make, and maybe Cliff would want to jump in, but our consideration of the option to offer -- make an offer to acquire is really rather recent given the significant changes that have just recently taken place in the industry over the last 90 days, and we've given those current moves toward consolidation in the sector we just really believe that now is the right time for us to combine with a mapping supplier.

I would categorize it that way.

And why that rather than kind of take the -- however long it took to build your own map?

Is it really a question of lost time?

I think it's -- it is an exceedingly difficult task to build the maps from scratch.

I think it's what we call technically possible, and there's certainly new technology that can be brought to bear in doing so, but it's a proposition that's got high risk from an execution point of view, and a very long time schedule, and it's also not inexpensive.

Very good.

In terms of your characterization of the product mix, when you talk about one-third being low end, do you include things like the wide version of the 200 or the pan European version of the 200?

Would that also go into that low-end bucket?

Part of that two-thirds?

Yes.

The remaining C series, the nuvi 200, the nuvi 200 wide, all of those that you mentioned, yes, those are low-end.

Then if we look deeper into that bucket, how has the traction been for the -- let's say the higher end of the lower end and how is that mix kind of developing into the fourth quarter?

I think it's continued to be pretty strong but as we go through a pretty competitive holiday season we're expecting prices to be much lower and I think the overall environment will be quite aggressive in terms of price, so that's why given our guidance we're expecting margins to continue to decline.

One more question, and I'll get back in the queue.

On the outdoor and fitness, nice growth there, especially considering the season.

To what extent do you think that's a reflection of kind of the new product enhancements and to what extent is it just really increased awareness and demand for GPS in general?

I think certainly there could be some combinations of both of those things although we saw strength across the entire breadth of the outdoor fitness line.

Of course, the Astro provided new revenue which we didn't have before.

Our fitness line is growing nicely.

The outdoor line benefited from the release of new high sensitivity receivers which was received well by the market.

Thank you.

I'll get back in the queue.

Thank you.

Your next question comes from the line of Jeff Rath of Canaccord Adams.

Good quarter.

I was wondering, Kevin, if you could give us a little bit of color as it relates to pricing differentials that you see in Europe versus North America.

And this is particularly for the Auto/Mobile segment.

What are they, and with the mix shift, how is that pricing differential changing, and maybe even if you can give us some color going forward?

Thanks.

Yes, I think there's several points here.

First of all, the European market historically, first of all, it's fragmented, as we've talked about many times, country by country, but in general we've seen about a 15% differential between price historically.

We've recently, because of what we've done in the U.S.

market on price, we've seen that gap shrink, and it's much, much lower, the differential between U.S.

and Europe.

In fact, if you just look at both continents growing toward mass market levels that's likely to continue.

The gap is -- I'm not saying it's zero, but it's much smaller than it used to be.

Going forward, as I just said, I think it will be about -- I think the pricing differential would be very little difference between the two continents.

Your next question comes from the line of (inaudible) with Morgan Stanley.

Thanks for taking my questions.

Just a couple of quick ones.

Following along with that last question, you've always had higher margins, gross margins, on your U.S.

PND business, partly because of that, that price gap.

Are you seeing margin conversions as well in the U.S.

versus Europe?

And then on the mix, that two-thirds of, I guess unit volume being the low end in Q3, where do you think that goes in Q4?

And then I've got one more after.

Okay.

The first one is -- was on the U.S.

and Europe piece?

Yes.

I think margins have come down in both continents, and I think going forward we would see, just like the pricing compression or the pricing differential, I think we'll see less difference on the margin as well.

Then the second question was the mix from two-thirds roughly in Q3.

We could be as high as three-fourths or 75% low end in the fourth quarter.

It's difficult to predict exactly depending on sell-through, but we went from 50% low end in Q2 to two-thirds in Q3 and I think that's going to continue to grow at the low end, just due to the price.

Okay.

Great.

Then just lastly, on component costs, as you realize the full impact of the higher NAND flash cost and LCD costs in Q4, do you think your total cost of goods sold per unit in PND could actually go up sequentially in Q4?

We don't expect that, although we have paid premiums to obtain sufficient flash memory and a few other components, but overall we don't see the net increase of our product cost.

Great.

Thank you.

Thank you.

Your next question comes from Ben Radinsky with Bear Stearns.

First on the Tele Atlas acquisition, Navteq when you discussed your license opportunities with them for the future did you find them to be a willing partner, or was this something that was done in a vacuum, the negotiation, excluding any potential acquisition of Tele Atlas?

I think we've been saying all along that we have longer term contracts with Navteq, and that's definitely true.

We haven't had a lot of discussions in terms of what things look like beyond the expiration of those contracts.

Okay.

How do you feel about capacity in the pipe for '08?

You mean as far as our ability to meet demand?

Yes.

Just given our investments recently this past year, $100 million of CapEx at the Taiwan factory, we feel like we're poised to be able to meet the growing demands for the PND market into 2008.

So you don't expect any major capital expenditures over the next six quarters?

I think major in terms of a facility purchase, no, but we'll continue to expand production lines as demand and unit capacity needs are increasing.

Okay.

And then the last one for me, if you were just to take your full-year guidance for the outdoor business, it implies 15% year-over-year growth in Q4, which is down from 25% in Q3.

Can you talk about why you have that slowdown in year-over-year growth and -- especially considering the breadth of product offerings that you now have in outdoor?

I would expect it to be seasonally strong with the holiday season.

I think we see roughly $7 million increase on actual sales, but from a, yes, you're right, from a growth rate it's only 15%.

I think we have been kind of up and down all year on Outdoor/Fitness so we're remaining to be conservative as we go into the holiday season to see how those units continue to sell through.

Okay.

Thanks.

Thank you.

Your next question comes from the line of Peter Friedland with Soleil Group.

Hey, guys.

So I guess first on the Tele Atlas deal, I guess what's plan B at this point if for whatever reason you get outbid?

I think we're pretty committed to making it work.

I think given our announcement this morning and the news that we've tried to emphasize in our strategy, we think it's a very strong strategic fit.

Plan B, I don't know that we could comment on speculations or other possible outcomes.

We're pretty committed to acquiring and feel like our offer is very strong.

As far as some of the acquisitions you made in Europe of the distributors, what are you seeing as far as impacts on either your sales or your margins?

I think the two that have closed this year were France and Germany, and we've seen market share gains in both of those countries, so it appears that the strategy of acquiring and having a more formidable front to the retail channel has been successful, although we're still not happy with where we stand on market share, we have seen increases.

The other two that are pending, or actually three that are pending, we haven't -- we have not been able to benefit yet.

That's Spain, Italy, and Denmark.

So those are still in due diligence phase.

And then on ASP, so what's the best way to think about what you're seeing in this market as far as ASP declines and then apples to apples price declines on your products?

Are you talk about just for the fourth quarter?

Fourth quarter and then going into '08, if you can comment.

Can't comment probably on '08, but if you look at the full year, just on the PND, which is probably what you're referring to mostly, since we don't have nearly as much price decline on the other segment, we're looking at an overall ASP decline for the full year around 30%.

Going forward I think we'll, as we've mentioned, the prices will continue to come down.

However, probably not at the same level in 2008 as we saw in 2007 on a percentage basis, just because of how far they've come down in one year this year.

Great.

Thank you.

Thank you.

Your next question comes from [David Niederman] with Pacific Crest Securities.

Just a quick question on the TA deal.

So as you look at making the deal work have you modeled out scenarios by which TomTom licenses from Navteq, and if all that business does walk away, at what point does the deal not work for you any more?

I can't give significant amount of detail, but we have modeled out various possible outcomes, one of which is the one you suggested, and still feel like under nearly any outcome this is a good deal for us.

Okay, great.

And looking at the margin declines this quarter in marine and outdoor mobile, can you maybe provide a little color?

Is it just mix, and do you expect a rebound in Q4, or is it beyond that?

I think it's mix and volume, particularly in the marine business.

We have a significant Q2 season, then we see a fall-off in Q3.

Because of the reduced volume in marine we nearly always see a drop-off in operating margin during that period.

Outdoor/Fitness is more product mix.

Aviation was fairly stable, as I mentioned.

Thank you.

Your next question is from the line of [Marcel Gantos], Bloomberg.

Yes, good morning.

My question is the following.

Could you explain what the strategic rationale is?

Why do you really need to own your map supplier, and are you going to buy other component suppliers as well?

I think maps are obviously the key ingredient that makes these devices work, and it's a unique asset that requires a lot of effort to create, and given the changes in the industry, obviously we feel a need at this point to exercise our obligation to lead and provide a vision as well.

As far as purchases of other suppliers, we can't really comment on future activities.

It's unlikely we would go acquire other major suppliers at this point, though.

And could you say something about the finance commitments?

Who is the bank providing the commitments at this point, and what is the exact borrowing need?

We haven't made that public, other than to say it's a combination of our own cash.

We mentioned the $1 billion that we have in our own books, and then a combination of term loans financed through both Credit Suisse and Wachovia, so we feel like we have very strong secured financing commitments in place and ready to move forward on the deal.

Your next question comes from the line of Scott Sutherland with Wedbush Morgan Securities.

Thank you.

Good morning.

First, on the Tele Atlas deal, do you think that this was inevitable over the long term that the device manufacturers and the maps would get together, or would it have stayed -- if it stayed stand-alone would you have ever made this move?

Well, again, as we mentioned before, we feel up until about 90 days ago the industry was managing under independent suppliers and device providers.

Clearly there's a consolidation underway, and we want to provide our leadership to that.

But we feel like it is a strategic asset that's important to the growth of the category, and the entire industry.

Okay.

A follow-up to your previous question.

You said that this year you're looking at a 30% decrease in PND or Auto/Mobile ASPs.

Is that due to product mix, and if so what is it for like products or equivalent products?

Are you seeing much pricing pressure on the same products?

Same product, as you're aware, Scott, this market is changing rapidly, and products are being phased out and transitioned very quickly.

So if you look on a like for like product the price compression or erosion is even higher than that.

So we're having a combination of both natural price erosion in product mix moving from high and mid range down into the low end, especially during the holiday season.

Thank you.

Your next question comes from Brandon Dobell with William Blair.

From a strategic perspective how would the acquisition change your strategic direction or your philosophy around the in-dash market and also the wireless market relative to your Garmin mobile offering?

I think that's one of our strategic rationales for this acquisition, is it does allow us to participate more broadly in the automotive OEM space as well as in the wireless space as both device providers as well as content providers.

Can we take that to mean that you, within the wireless space in particular that you would -- does it make you more likely to become a -- what do you call, hands isn't the right word, but something like that, or is there a way to become in an indash supplier that you think now is easier because of the transaction?

I don't know that it becomes any easier just because of the content piece, because it really requires the whole package, but we recognize it as a way to participate more broadly in those industries.

And then one for Kevin, your current thoughts on component costs, the near-term outlook on the -- anything on the horizon that might change your view as to, let's call it the next 12-month trajectory and some key component for you.

I think anybody who sits here and tries to predict 12 months on the component market is pretty crazy but in general to Min's comment earlier we feel like we've been through a period of time, particularly on the flash, where we've seen increased costs.

From .

what we hear in the industry it's likely we can start to see some additional material cost reductions on that particular component but we're not prepared at this point to say if it's 5%, 10%, or 20%.

I think we should see lower costs on the bill of materials in general but that's about all we can say at

Final quick one for you, Kevin.

In terms of Q3 or Q4, could you help us quantify the impact from the distributor acquisition, either operating profit or revenue would be great, thanks.

Unfortunately we don't break it down below the segment level.

We'll just say that the contribution of France and Germany, the two that have closed, have helped us from an incremental sales, but we've also looked at our other SG&A and our advertising and those two lines on the P&L have also added costs to the total Company as well.

So I can't give you any further detail other than that.

Thanks.

Thank you.

Our next question comes from the line of Jairam Nathan, Banc of America Securities.

Hi, thanks.

Can you talk to us about the competitive environment, especially with the wireless devices kind of having navigation?

Are you more worried about more competition coming within the PND space or outside of the PND space?

Well, I think the current situation in the market definitely major players have been able to make a name and build a product category today.

I think that inevitably there's going to be some shift in the market as in-dash becomes more affordable, and as handsets become location-enabled, and able to run navigation applications.

So we're well prepared, I think, in all those fronts by offering devices that can address the OEM market as well as the wireless market, and, of course, in light of Tele Atlas, it also allows us to participate as a content provider to those areas.

Just on the European market, given that it's kind of matured a bit, are you seeing any replacement demand on the devices on the PNDs?

I think we're still seeing a vast majority of the units being sold as far as we can tell as new first-time users as the penetration rates in the PND category are still quite small.

But without a doubt we see, as we've brought prices down we've seen some repeat buyers and replacements and we expect that that replacement cycle to increase as the market matures.

And also, price elasticity has been extremely good here, and how are you kind of thinking about that going forward in '08, given that you said you'd probably not see price declines?

I'm sorry, what was the question?

We have seen very good price elasticity in '07 on the PND side.

How do you kind of -- how do you see that going through in '08 especially considering that you said you wouldn't see the 30% price declines?

I think without a doubt, at this point, it appears that price declines on a percentage basis will be lower than the 30% we've seen this year.

And as you've seen, the price elasticity, the U.S.

market, for example, going from roughly 3 million units last year to maybe 9 to 10 this year, we see continued growth not at a 3X rate, but still at a very rapid rate in 2008.

As prices continue to come down, probably closer to 20% level.

Are you saying pricing will -- 20% is a price decline you're talking about?

Year-over-year, yes.

Year-over-year ASPs.

All right.

Thank you.

Your next question comes from the line of Jon Braatz with Kansas City Capital.

Kevin, in the past you've always said that you used the best maps available, and obviously you've been using Navteq maps and with the potential acquisition of Tele Atlas you will be migrating towards their maps.

I'm not really familiar with Tele Atlas maps, vis-a-vis Navteq, but can you talk a little bit about sort of the competitive difference in the maps and as a consumer, will I see any difference in the mapping that I see on a Garmin device?

In the future with a Tele Atlas map versus a Navteq map?

I'll let Cliff answer that since he's probably more appropriate.

I think historically, Jon, Tele Atlas was regarded as a strong leader in Europe and Navteq was regarded as the leader here in the North American area.

I think in the recent year or two that difference has been narrowed a lot so that the maps offered by the two suppliers are largely similar or comparable to each other.

So going forward, I wouldn't expect you to notice differences in devices that offer one map versus the other, although looking towards our vision of the future, in the long term I would expect that we would be able to differentiate the maps and provide more value.

Cliff, would you envision moving -- I assume you would -- but moving all your mapping from Navteq to Tele Atlas, or are there markets or geographical areas where Navteq might just have a little bit of advantage?

Yes, again, looking at the primary markets of North America and Europe long term we would want to move all our maps there.

I think other markets, as Min pointed out, are kind of fragmented in terms of how they're served.

We would anticipate using Tele Atlas maps where they're available but in other cases sometimes they're not.

You do have contractual relationships with Navteq.

Would you, assuming this acquisition is completed, would you break these contracts prematurely or you let them expire naturally?

Well, we can't really comment on that, as we mentioned before our intention would be to start moving certain product and certain markets over the next 12 to 24 months.

Thank you very much.

Thank you.

Your next question comes from the line of [Dean Doe] with [All Care Capital].

You spoke a little bit about the margin compression in Q4 and you spoke about what the operating margin effect is, I guess, but can you tell us a little bit just in terms of gross margin what you're thinking?

Well, I think you just extrapolate the numbers down to a 28% operating margin, we're definitely looking at, we went from 50% in Q2 to roughly 47% in Q3, and we're down into the low 40s by the end of the fourth quarter, throughout the fourth quarter.

That's basically implying a mid 30s gross margin on the Auto/Mobile segment.

Okay, thank you.

Thank you.

Your next question comes from the line of Justin Funnell with Credit Suisse.

Hi.

You mentioned earlier the transition to Tele Atlas products over the next 12 to 24 months and that there will be minimum legal costs of that.

Is that assuming that there's a provision in the contract that will allow you to exit?

Again, we have multiple kinds of contracts with Navteq, and I'm not prepared to speculate in detail on how those work.

But we anticipate an ability to transition certain products in certain markets over the next 12 to 24 months.

Okay.

And also, what really drew you to Tele Atlas over making a counter bid for Navteq?

I think we looked at several strategic alternatives and we evaluated several outcomes and we just felt like Tele Atlas, given the potential price we would be able to offer and the multiples that were available from a financial perspective but probably even more so from a strategic perspective made the most sense for Garmin.

Thank you.

Thank you.

Your next question comes from the line of [Drew Figdore] with Needham and Company.

Drew?

--24.50 offer didn't make a lot of sense to me, so the stock was trading 24, and so I just want to understand whether that was because 24.50 was your best and final offer or why choose a bid where the market was trading it independent of any event?

So whatever guidance you'd give me there.

Well, I think, first of all, the market wasn't trading at 24.

It was trading down in the 22.50 to 23 in recent days.

Secondly, the prior offer that had been on the table was 21.25, and we felt like a 15% premium over that number is a very strong offer and a very strong signal to the market that we're interested in acquiring the asset.

I don't know if it was earlier addressed.

You don't have to necessarily address it, but I thought you had the ability to resolve your mapping needs by not acquiring it.

So I don't know if you saw something that changed or if, in fact, TomTom outbid you, are you ambivalent at some point to whether you can just address your needs that way, or do you feel like given your product selection you really need to own the mapping product itself?

Again, we're looking at this from a real strong sense of strategy and going forward and how do we want to participate and lead in the market, and we feel like this makes sense in order to play at a broader level and be able to provide leadership to the industry.

What is one thing it gives you?

So being able to have the data will give what you then?

What's the difference from where you were?

Well, it gives us the ability to provide a vision for the content that will differentiate devices using that content.

It will drive device innovation and overall be beneficial for the industry.

Okay.

I appreciate it.

Thank you.

Your next question is a follow-up from Yair Reiner with CIBC World Markets.

Just one follow-up on on the PND gross margin.

You probably noticed last week hat TomTom reported results.

In general, your gross margins have moved more or less in line with TomTom's.

This quarter they are almost 600 basis points higher.

I mean, it seems to me maybe one reason is maybe some more aggressive pricing on your part in Europe, maybe they moved to lower priced flash.

Any thoughts on why the differential and how that should actually work in the future?

Yes, I think there's a couple issues there, or a couple of answers.

Number one, I think it does -- it is a products mix issue, in terms of our selling more at the low end, and I think TomTom introduced some new products that would be categorized as not low end, but they were able to benefit from.

I think if you look at just a comparison on the geographic mix of products they would likely have benefited more from the euro strength versus the U.S., and we just recently started to invoice some of our European dealers and distributors with euro but not at the same level as our competitors.

So I think those are the two main differences probably.

Thank you.

Thank you.

Your next question comes from the line of Jim Duffy with Thomas Weisel.

Hi there.

This is Christian in for Jim.

Had a question on European market share.

Wondering if you could give us some guidance if you're on track to hit that 20% target for year end?

It appears just from the independent market research that's been published that we're selling at at least 20% market share in Europe right now.

That's great.

And then in terms of, I guess, if I can ask this the awkward way what inning are you guys in, in terms of the integration of your distributors that you repurchased, and where do you see sort of the most traction so far?

As I mentioned on an earlier question I think we've seen traction from both the French and the German distributors and feel like much further along probably in France because we acquired in January of this year, and we're just in month four now of owning our German distributor but we've made pretty rapid progress of both.

All right, thanks a lot.

Thank you.

Your next question comes from the line of Andrew Bond with Millennium Partners.

Hi.

Given that when Nokia made the merger announcement to buy Navteq that they said they were committed to maintaining commercial relationships with all the existing customers what is it about that, that wouldn't be palatable going forward?

Is it just the development pipeline issue of having to share that with a competitor, or what is it about that, that wouldn't be palatable?

I think there's been a lot written about the various scenarios and where sensitivities may lie, so I don't know that we need to comment any further on those.

Again, we're looking at this strategically now from the desire to serve more broadly in the industry.

Okay.

And I guess just a quick follow-up.

Was there any possibility of trying to break either deal through the antitrust review processes to try to point out, I don't know, some of the competitive issues that might arise from the vertical?

I think we cooperated with the antitrust authorities that were evaluating those other deals, and probably don't want to comment on the strength of whether those were going to be successful or not.

Okay.

And I guess finally, if you are successful in buying Tele Atlas, are there any commitments that you would make as far as maintaining open standards or working with any of the existing customers?

I think we've stated really clearly in our materials and all of our communication today that it's our intent to operate Tele Atlas as a independent subsidiary where Garmin engages as a customer and where Tele Atlas is the voice of all customers of Tele Atlas data, so we anticipate that the data will be freely accessible to any player without any prejudice.

Okay.

Thank you very much.

Thank you.

Your next question comes from Richard Edwards with Citi.

Just want to pick up on that last point you made about the non discriminatory returns to all Tele Atlas customers.

In fact TomTom has said exactly the same thing.

Nokia has said exactly the same thing about Navteq if and when they are net.

So what is it about would they've promised that you think sounds hollow and would, therefore, potentially threaten you going forward, and indeed is it fair to conclude, then, that you would be significantly, strategically kind of hampered or impaired if you don't own Tele Atlas?

Well, everyone involved in these transactions so far is committed to those open access, which they've all made public statements, and we have as well.

I think again what we're focusing on is what's the rationale and the strategy going forward.

Again, our mind-set is really to be able to provide leadership to the market, and provide maps that differentiate.

Hello?

Your next question comes from the line of [Maha Matra] with JPMorgan.

My question is, you made a comment on the timing of the deed.

You had said that you will make the offer as soon as practically possible and before the 4th of December which is when the tender offer expires from TomTom.

Is there any further clarity you could give us on the timing?

Well, I think we made introductory connections with the Tele Atlas management team this morning, and under Dutch law we're required to have meetings with them within the first seven days, and it's our intention that we would come up with a formal offer on or around November 22, I believe, so within about three weeks from today.

All right.

Just one more question.

It was reported in the press that you have been buying Garmin shares -- you have been buying Tele Atlas shares.

Is there anything you can tell us about the equity stake that you current have in Tele Atlas?

Yes, we have acquired and built a stake and we will also be disclosing what that amount is but we will have reached at least a 5% threshold.

We can't comment any more about what specific ownership position is but that disclosure is in process right now.

Has that stake building been after your announcement, or has it been done in the days preceding?

That's prior to announcement.

Thank you very much.

Your next question is a follow-up from Jeff Rath, Canaccord Adams.

Thanks, guys.

You're being generous with your time here.

Just a market share question if you will.

As this market -- as you're attempting to establish better market share in the U.S., I wonder if you could give us some color on your expectations for market share in the U.S.

for the fourth quarter and the outlook, if you will, at all in your trade-off market share for margins, say in 2008?

I think just going into the fourth quarter we've seen -- been able to retain at least a 50% market share consistently throughout the year.

As we go into -- again, the high-volume fourth quarter, we would expect to be able to again hold that type of position.

Again, this is during a period where the U.S.

market is growing 3X year-over-year.

So that would be a significant accomplishment if we were able to achieve that.

Going into 2008 I think it's too premature at this point for us to comment on what our market share will be as we enter or exit 2008.

Thank you very much.

Thank you.

Your next question comes from [Tony Rainier].

Firstly congrats on the quarter and thanks for taking so much time on the call.

You have kind of stated that given the way the state of the world has changed in the last several weeks, it's kind of forced our hand a little bit and also noted the importance as far as mapping.

So maybe a quick comment on the state of the world if there's any other players or how this can possibly change?

You've kind of pained it as two picture game and kind of forced our hand, so any other options?

If this doesn't work?

Yes, again, we're looking at this from long-term strategy point of view, and how we can provide leadership to the market.

I think clearly we've evaluated lots of different scenarios and options, and I'm not really able to comment on all of those, but we feel confident in our ability to be a leader going forward in this market.

And so other people out there, and there's been certainly names after the last several weeks who might come up or the next potential player in mapping technology or mapping locations.

I don't think we see any compelling solution at this point that's a strong alternative other than the ones that are already there.

So then, and my apologies if this comes out, as it may sound -- do you kind of feel you're backed into a corner a little bit, or kind of our hand is forced?

Well, clearly we've said that the industry has gone through a lot of transformation in the last 90 days, so our move today reflects some of the rapid changes that are going on, but again, our clear focus in going forward is to lead the industry and provide a vision that will drive innovation.

(OPERATOR INSTRUCTIONS) Your next question comes from [Jay Dupree] with Dupree Capital.

Thanks for taking the call.

I have a couple questions on the -- other than the timing of the merger, clearly Tele Atlas is trading at a much higher price right now than what you've bid.

So the market is suggesting you're going to have to pay more and there's going to be a bidding war.

I'm confused how you can call this leadership when you're basically the third one in on buying a mapping company after the table has already been set.

So could you please explain how this exemplifies leadership?

Well, again, we made comments earlier that the duopoly that was in existence before is one that's worked reasonably well for the market, but we do recognize opportunities to do better in terms of content, coverage quality, features, all of those things.

We feel like now is the right time to jump in to that and provide that leadership.

How is this not exemplifying leadership when arguably TomTom exemplified better leadership by making the bid for Tele Atlas many months ago at a much lower price when you could have done that and you could have bout Navteq which is your main map supplier, and you have no relationship with Tele Atlas.

I'm just completely confused as an investor why this in the best interest of Garmin's shareholders?

Why it's part of your overall business strategy and model, particularly after buying I don't know how many distributors in Europe.

I am just at a loss to understand how this is a smart move on your part.

Could you just please, get rid of the canned lines that you're using about leadership and just -- what made you have to do this now?

Clearly you're showing some kind of fear out there about the change in the space.

Is it because there's a movement to navigation devices using cell phones for navigating devices?

Is something about the mapping software that's making you do this that when you recognized that your overall business model and manufacturing PNDs is just not the future, could you please just elucidate us a little bit?

Explain this.

It's just very confusing.

I think you can call it fear or you can call it preparing for the future, and for us, we're viewing it as a transition to the future.

That's the best you can give me?

I mean, it really is kind of like a day late and a dollar short here.

Although it's going to end up being a dollar more if you continue to -- if this turns into a bidding war.

Well, we think we've offered an attractive offer to Tele Atlas shareholders which recognizes the value of the content, and we think our offer speaks for itself.

Okay.

And could I just ask you a quick question on pricing for the, for Q4.

I understand there are going to be some aggressive pricing from some of your competitors.

Are you planning to meet them head-on, say, for example, if (inaudible) has a $99 PND, are you going to meet them head-on?

You have built up a lot of inventory, so I'm expecting you're anticipating some aggressive action.

We've built up inventory as is typical of this time of the season and we've already made some pricing announcements, and we'll have, depending on the different products as we go through the fourth quarter, we'll have some additional price reductions as we enter the Black Friday but as far as whether we're going to have a $99 product, we can't really announce that if we haven't already made an announcement on a specific product other than to say prices are coming down in general.

You have no further questions at this time.

I think we'd like to go ahead and close the call then and thank you, everyone, for your participation, and do feel free to give us a call if you have additional questions, and we'll look forward to updating you again with the fourth quarter.

Thanks a lot.

Good-bye.

This concludes today's Q3 conference call.

You may now disconnect.